It’s a taxing time

Six strategies to lower your tax bill for 2025

Yuck – it’s tax time… again! Maybe you’ve already completed, filed and paid for the year. If so, then way to go! You are in a very proactive minority. There aren’t a lot of stats about when people file, but a survey in 2019 indicated that on April 2, 51percent of British Columbians had yet to file their tax returns.

If you will end up owing money, then filing at the last minute may not be a bad plan, but if you are getting money back, then filing sooner means that you will get your money sooner, so it’s best to get a jump on it. Unfortunately, it’s too late to do anything to affect your 2024 tax return. That ship has sailed and all you can do at this point is file it as it is. And it may seem too soon to you, but now is the time to start thinking about your 2025 tax return. Below are some possible tax tips to get you started. In most cases you have until the end of the calendar year to get these done, but it’s never too early to think and plan.

1. Contribute to your RRSP (in some cases even over-contribute) – RRSPs are a fantastic deal for anyone in a high tax bracket. A one-time over-contribution to your RRSP in December may also make sense if you turn 71 this year and have a high income.  A one-month penalty would apply, but it may very well still be worth it.  Talk to a specialist.

2. Take full advantage of your TFSA – all income earned in a TFSA is tax free, making TFSAs a great deal for everyone. They can also be a great way to smooth your income if it’s lumpy, making contributions to RRSPs in high income years and to TFSAs in low-income years. Or contributing to both and then making withdrawals from the TFSA in low-income years. Either way, do all you can to take advantage of these awesome vehicles.
   
3. Donate to charity – donate before December 31 to get a tax receipt for 2025.  Here in BC (for most people) that receipt is worth 43.7% of the gift (assuming that you’ve already given at least $200 in the year).  In other words, a $1,000 gift will save you $437. In-Kind gifting of shares that have significant appreciation is one of my personal favourite strategies (but act early as these transactions can take weeks to complete).  Gifting a publicly listed security (including mutual funds) with accrued capital gains to a registered charity will provide the donor with not only a tax receipt for the gift but also eliminates the capital gains tax.

4. Get Vocal – get the name and email address of your local MP and/or constituency office.  Do not be shy to let him or her know how you feel about your tax burden.  MPs want to hear from you.  Why not let them? The more of us that complain about our high tax burden, the more pressure politicians will feel when considering tax increases.

5. Tax Loss Selling – consider selling investments that have gone down in value to offset capital gains triggered throughout the year.  Capital losses can be carried back 3 years and carried forward indefinitely.  If planning to repurchase the investments, beware of superficial loss rules that invalidate your losses if securities are repurchased in your or your spouse’s accounts within 30 days.

6. Business owners – paying taxes later is always better than paying them sooner.  Consider purchasing extra inventory or other required items in the last quarter of the year to increase 2025 expenses. Conversely, if possible, consider delaying completion of orders for a few days/weeks in order to push income into 2026 if you are able.

As I mentioned earlier, tax planning should not all be done in the final month of the year.  While the deadline for most activities may be the end of the year, tax planning should be done on a continuous basis and considering multiple years.  Some of the items above are quite technical and should not be done without professional help, but others you can easily do on your own. Where possible, I always recommend automating as much as you can; for example, monthly RRSP and/or TFSA contributions rather than ad hoc. Take a look at each of the items above and see if there are ways that you can automate them so that you aren’t scrambling at year end to get them done. 

Taxes are never fun, but with some advance planning, hopefully you can make them a little less painful.

“The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.” Prov 21:5 (ESV)

Arnold Machel lives, works, and worships in the White Rock/South Surrey area. In 1995, he founded Visionvest Financial Planning & Services with the dual goals of “effecting positive financial change” and assisting clients to “Invest with Vision”. Since that time Visionvest has received numerous recognitions, including being voted in the top three in the Best Investment/Financial Advisor category by Peace Arch News readers for the past four years in a row.

Arnold has held the Certified Financial Planner® designation since 1998 and has served on many boards, currently sitting on the board of Abundance Canada (formerly the Mennonite Foundation of Canada), a national charity focused on helping Canadians give generously.

Questions and comments can be directed to him at dr.rrsp@visionvest.ca. Please note that all comments are of a general nature and should not be relied upon as individual advice. While every attempt is made to ensure accuracy, facts and figures are not guaranteed.